In the present situation where the whole world has come to a stop, it is now more important than ever to have savings in hand. There will be a massive impact felt due to the coronavirus, and businesses need to be ready for any situation which comes their way. It is because of this reason that outsourcing the accounting functions of a company will be more beneficial for the management.
Accountants – for many – are SMEs’ trusted advisors.
The Covid-19 crisis is a critical time where SMEs need all the guidance they can get to navigate through the storm. We call on accountants and small accountancy practices to help struggling SMEs through these difficult times.
The following actions are required to be taken by accountants to support their struggling SME clients:
1. Informing clients about all aid options
Accountants should be aware of all financial (and other) forms of aid provided by national governments. It would be helpful for the national accountancy body to be aware of aid that other countries provide, so they can flag the best practices to their own national policymakers.
2. Applying the available aid to the client’s situations
Identify clients in high-risk sectors and those that would benefit most from public support measures. Help them by:
- Advising them on, and guiding them through, all the claims available to them
- Identifying options to help them diversify their business
- Providing a path to accessing emergency financing being provided by governments
- If possible, consider renegotiating your fees and payment schedules with them
3. Helping with immediate business survival
One of the ways in which accountants can help is by informing their SME clients of immediate measures that might make the difference between survival and collapse. They should also help them implement these measures where required. Examples of this include:
- Accessing the reliefs on offer as soon as possible to increase the impact.
- Reviewing and adjusting their cash flow forecast to determine what impact cuts in sales will have on their ability to pay their suppliers and debt. Businesses should continue to pay their suppliers when they can to help avoid a widespread collapse of the financial system.
- Considering the business model to ascertain whether the SME can deliver goods or services in an alternative manner – such as by home delivery or online and whether it can downsize or stop certain activities, such as travel, sales, and marketing.
- Understanding their supply chains and planning for disruptions in the supply of products and services. This may involve scaling back production for some parts and stock and re-considering suppliers and clients from countries heavily impacted by the virus.
- Checking their insurance to understand whether they are eligible for a claim for any financial losses.
- Communicating with their staff to discuss the possibility of short-term pay cuts.
- Ensuring that their financials are up to date so they can monitor profitability, stock, and debtor-creditor balances. Many governments are offering deferment of tax returns and financial information filing. However, such deferments’ long-term impacts are not clear. They could result in a later bottleneck in filing such returns and the possible loss of financial and tax data.
- Negotiating with their debtors- for example, to offer discounts in exchange for early payment.
- Negotiating with their debtors– for example, to offer discounts in exchange for early payment.
- Continually monitoring the situation and informing clients of new initiatives so that when lifting the restrictions becomes imminent, they are ready to recommence trading.
- If all else fails, consider the options within insolvency, as it may be possible to rescue viable businesses by debt reorganization rather than being forced into full liquidation.
4. Guiding SMEs’ plans for the medium term
Many SMEs are likely to be in crisis mode. Our chartered accountants help them avoid emergency measures that could endanger the business’ medium-term viability. They can, for example, help them to:
- Reconsider whether laying off employees is unavoidable. On top of having negative social and societal impacts, cutting down on the workforce also constitutes a loss of key skills for the business. This should be a last resort option only, so make your clients aware of that and help them access all alternative options, aid, and financing available first. It is possible that staff would prefer taking a temporary pay cut over redundancy. This could increase staff loyalty and allow the business to resume operations once the restrictions are lifted.
- Start building financial reserves as soon as possible to prepare for a new peak in coronavirus cases even after the current restrictions are lifted.